Preliminary audit engagement activities_2021

Transcript

00:04

Hi there! 

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Today we will have  a closer look at  preliminary audit  engagement activities.

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The preliminary audit engagement stage consists of 4 activities

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Remember

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During these activities you need to   consider certain aspects as  prescribed in  ISA 210, ISA 220 and ISQC 1

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Activity  1

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Investigate prospective or existing clients

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Examples

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Consider the Financial Reporting Framework.

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Management's under- standing of their responsibility. Integrity and business reputation.

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No limitation on scope. Unrestricted access.

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Activity  2

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Audit firm's skills,  competence and resources

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Includes: 1.  Do they have enough time and resources (personnel)? 2.  Do they have the capabilities  i.e knowledge? 3. Are experts needed?

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Activity  3

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Audit firm's compliance with statutory and ethical  requirements

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For example: Compliance with Companies Act and APA, Evaluate independence, Consider 5 fundamental principles of CPC

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But wait! There is more!

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Before establishing the Terms of the Engagement in Activity 4, as part of activities 1, 2 and 3, did you also consider the following:

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Do you have permission to contact the previous auditor? Was there any significant  matters from the previous audit? 

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- Does the removal and appointment of auditors comply with the Companies Act?

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- Did they resign due to professional reasons?

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- Will the audit client be able to pay the audit fee?

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As a last activity, determine the Terms of the en- gagement in Activity 4

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Decide    

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Whether or not you should accept the audit client.

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If YES

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Prepare the audit engagement letter

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The END